Bill H.3344
188th (2013 - 2014)

An Act relative to the rights of student borrowers

Bill Title: An Act relative to the rights of student borrowers

By Ms. Andrews of Orange, a petition (accompanied by bill, House, No. 3344) of Denise Andrews, Jason M. Lewis and Eileen M. Donoghue for legislation to further define the rights and duties of students and creditors relative to student loans. Financial Services.

SECTION 1. Chapter 140D of the General Laws is hereby amended by inserting after section 12, the following section:-

Section 12A. (A) Except as otherwise expressly provided in this chapter, a creditor of a student loan as defined in section 1 , its officers, employees, agents and directors shall not disclose to any person any financial information relating to a customer. Creditors shall adopt reasonable procedures to assure compliance with this section.

(B) This section shall not prohibit any of the activities listed in this section. This section shall not be construed to require any creditor to make any disclosure not otherwise required by law. This section shall not be construed to require or encourage any creditor to alter any procedures or practices not inconsistent with this section. This section shall not be construed to expand or create any authority in any person or entity other than a creditor. The following actions are required:-

(1) disclosure of information to the customer after proper identification;

(2) disclosure authorized by the customer, provided the disclosure is limited to the scope and purpose that the customer authorizes;

(3) disclosure sought by the office of student financial assistance or the health and educational finance authority pursuant to its authority and obligations;

(4) the preparation, examination, handling or maintenance of financial records by any officer, employee or agent of a creditor that has custody of the records;

(5) the examination of financial records by a certified public accountant while engaged by the creditor to perform an independent audit;

(6) the disclosure of information to a collection agency, its employees or agents, or to any person engaged by the creditor to assist in recovering an amount owed to the creditor, if such disclosure is made in the furtherance of recovering such amount;

(7) the examination of financial records by, or the disclosure of financial records to, any officer, employee or agent of a regulatory agency for use only in the exercise of that person's duties as an officer, employee or agent;

(8) the publication of information derived from financial records if the information cannot be identified to any particular customer, deposit or account;

(9) the making of reports, disclosures or returns required by federal or state law;

(10) the disclosure of any information permitted to be disclosed under dishonor of negotiable instruments under section 3-502 of chapter 106;

(11) the exchange, in the regular course of business, of credit information between a creditor and a credit reporting agency, provided such exchange is in compliance chapter 93A, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq;

(12) the exchange, in the regular course of business, of information between a creditor and an account verification service, provided such exchange is in compliance with chapter 93A, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq;

(13) the exchange of loan information that specifically affects a sale, foreclosure or loan closing, provided such exchange is for the purpose of accomplishing such sale, foreclosure or loan closing;

(14) the disclosure to civil or criminal law enforcement authorities for use in the exercise of such authority's duties, or the sharing of information, within an industry network, of suspected criminal activities;

(15) disclosures requested pursuant to a summons for trustee process under Rule 4.2 of the Massachusetts rules of civil procedure;

(16) disclosure requested pursuant to subpoena, provided that no disclosure shall be made until 10 days after the creditor has notified the customer that financial information has been requested by subpoena. Such notice shall be served by first class mail to the customer at the most recent address known to the creditor. The provisions of this clause shall not apply where the subpoena is issued by or on behalf of a regulatory, criminal or civil law enforcement agency;

(17) disclosure required by order of court;

(18) disclosure of customer financial information among directors, officers, employees or agents of affiliated creditors; provided, that such disclosure is limited to information necessary or appropriate to the fulfillment of any such persons' duties and responsibilities to the creditor or institutions; and provided, further, that such disclosure is made in compliance with chapter 93A, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq;

(19) disclosure of customer financial information of one creditor to another creditor in connection with a proposed merger, consolidation, acquisition or other reorganization transaction involving such institution; provided, that no further disclosure is made except in compliance with this section; and provided, further, that such disclosure is made in compliance with chapter 93A, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

(20) disclosure sought by the department of revenue pursuant to its authority and obligations under chapter 14;

SECTION 2. Chapter 167E of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by adding the following section:-

Section 17. The following words shall in sections 17 to 24, inclusive, unless the context clearly requires otherwise, have the following meanings:

“Borrower”, a borrower of a student loan.

“Co-signer”, a person who does not hold an ownership interest in the loan but who is liable for repaying the obligation. The co-signer must sign the loan application.

“Creditor”, a person or entity that holds or controls, partially, wholly, indirectly, directly, or in a nominee capacity, a student loan, including, without limitation, an originator, holder, investor, assignee, successor, trust, trustee, nominee holder, or loan servicer. “Creditor” shall also include any servant, employee or agent of a creditor.

“Creditor’s representative”, a person who has the authority to negotiate the terms of and modify a student loan.

“Effective date of transfer”, the date on which the loan payment of a borrower is first due to the transferee servicer of a student loan pursuant to the assignment, sale, or transfer of the servicing of the student loan.

“Promissory note”, a legal and binding contract for borrowing containing the terms and conditions of the loan, including responsibilities of the borrower to the loan.

“Servicer”, the person responsible for servicing of a loan (including the person who makes or holds a loan if such person also services the loan).

“Servicing”, receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan.

“Student loan”, a loan made to a student or a student and his or her co-signer for qualified educational purposes.

“Student loan servicer", a person who directly or indirectly acts as a student loan servicer, who is a servicer, with respect to private student loans or is a servicer of any private student loan in the commonwealth.

SECTION 3. Said chapter 167E is hereby further amended by adding the following section:-

Section 18. There shall be a private student loan commission consisting of 19 members as follows: the undersecretary of consumer affairs and business regulation, or a designee, who shall serve as chair; the attorney general, or a designee; the state auditor, or a designee; the secretary of education, or a designee; the commissioner of banks, or a designee; the house chair of the joint committee on consumer protection and professional licensure, or a designee; the house chair of the joint committee on higher education, or a designee; the senate chair of the joint committee on consumer protection and professional licensure, or a designee; the senate chair of the joint committee on higher education, or a designee; the minority leader of the house, or a designee; the minority leader of the senate, or a designee; and 8 members appointed by the governor: 1 of whom shall have expertise in federal, state and private student loans, and other student financial aid programs, 1 of whom shall be a person who was enrolled or is currently enrolled in a college or university in Massachusetts, 1 of whom shall represent public and for-profit colleges, universities, and proprietary schools, 1 of whom shall represent the Crittenton Women’s Union, 1 of whom shall represent a student loan borrowers advocacy group, and 1 of whom shall represent a consumer protection group.

The commission shall study and make recommendations based on the information that it gathers regarding the impact of private student loans on residents of the commonwealth.

The commission shall specifically study and make recommendations on the following: (a) the need for improved enforcement or changes to relevant Massachusetts criminal and consumer protection laws, including, but not limited to, the areas of credit transfer practices; (b) the need for new criminal or civil laws to deter deceptive or fraudulent acts by private student loan originators and provide relief to victims; (c) the adequacy of free or low-cost loan counseling and legal support for residents of the state in default on student loans; (d) the need for increased consumer education about private student loans and the financial responsibilities associated with private student loans; (e) the need for greater transparency regarding compliance with state and federal laws, loan default rates;

The commission shall report the results of its investigation and its recommendations, if any, to the general court. Drafts of any legislation necessary to carry out its recommendations shall be filed with the clerk of the house of representatives no later than 18 months after the passage of this act.

SECTION 4. Said chapter 167E is hereby further amended by adding the following section:—Section 19. Banks and lending institutions shall issue annual statements to their student loan customers and co-signers which include, but are not limited to, the following information: the balance of principal remaining to be paid; the most current interest rate available for the amount of principal remaining on said loan at the time such loan statement is printed; and a confirmation of the payments received in the past 12 months; the estimated date at which the balance of principal will be paid;

SECTION 5. Said chapter 167E is hereby further amended by adding the following section:- Section 20. Except as otherwise provided in this chapter, or any rule or regulation issued thereunder, any civil action for a violation of this chapter, or proceeding under section 6 which may be brought against a creditor may be maintained against any voluntary assignee of such creditor. The applicable standard of review of any claims brought by a borrower in any civil action under this chapter shall be to consider the borrower’s claims under a “least sophisticated consumer” standard in accordance with the Fair Debt Collection Practices Act at 15 U.S.C. 1692, et seq.

SECTION 6. Chapter 167E of the general laws, as appearing in the 2010 Official Edition, is hereby amended by adding the following section at the end:-

Section 21. A student loan servicer, doing business in the commonwealth, shall provide to a borrower or co-signer of a student loan, the name, address, toll-free telephone number and facsimile number of the servicer for (i) an individual employed by the student loan servicer, or (ii) the department of the student loan servicer, that can be contacted by the borrower to answer inquiries relating to the servicing of such loan. Such contact or department shall be available for contact by the debtor no less than 40 hours per week from Monday through Saturday, inclusive.

SECTION 7. Said chapter 167E is hereby further amended by adding the following section:-

Section 22. (a) A lender shall not knowingly make a student loan if the student loan pays off all or part of an existing student loan that was consummated within the prior 60 months or other debt of the borrower, unless the refinancing is in the borrower’s interest. The “borrower’s interest” standard shall be narrowly construed, and the burden is upon the lender to determine and to demonstrate that the refinancing is in the borrower’s interest.

Factors to be considered in determining if the refinancing is in the borrower’s interest include but are not limited to:—

(1) if the borrower’s new monthly payment is lower than the total of all monthly obligations being financed, taking into account the costs and fees;

(2) if there is a change in the amortization period of the new loan;

(3) if the borrower’s note rate of interest is reduced;

(4) if there is a change from an adjustable to a fixed rate loan, taking into account costs and fees; or

(5) the refinancing is necessary to respond to a bona fide personal need or an order of a court of competent jurisdiction.

(b) Notwithstanding any provision to the contrary contained in this chapter regarding costs and attorneys’ fees, in any action instituted by a borrower who alleges that the defendant violated subsection (a), the borrower shall not be entitled to costs and attorneys’ fees if the presiding judge, in the judge’s discretion, finds that, before the institution of the action by the borrower, the lender made a reasonable offer to cure and that offer was rejected by the borrower.

(c) The commissioner of banks may prescribe from time to time such rules and regulations as may be necessary or proper in carrying out this section. Such rules and regulations may contain such factors, classifications, differentiations or other provisions, and may provide for such adjustments and exceptions for any class of transactions as, in the judgment of the commissioner, are necessary or proper to carry out this section, to prevent circumvention or evasion thereof or to facilitate compliance therewith.

SECTION 8. Said chapter 167E is hereby further amended by adding the following section:-Section 23. The office of consumer affairs and business regulation shall promulgate rules and regulations to establish a student borrower’s bill of rights to ensure simplicity, transparency, and fairness in private student loans made to student borrowers and co-signers. Such rules shall include the following:—

(a) A third party loan servicer may not use unfair or unconscionable means in servicing any private student loan.

(b) Promptly accept and apply all borrower payments, including non-conforming payments, cure payments (where authorized by law or contract), and trial modification payments.

(c) Upon request the borrower on a promissory note, or an co-signer on behalf thereof, a lender, loan servicer or note holder who is receiving payments under a promissory note or other financial obligation shall provide a written payoff statement sufficient to enable the borrower or the co-signer to conclusively make full payment of the outstanding indebtedness under the promissory note or other financial obligation as of a certain payment date, which shall be specified in the request and which shall be no more than 30 days from the date of the request.

The payoff request shall be made in writing but the writing may be provided by facsimile or other electronic forms of transmission as may be requested or authorized by the party from whom the payoff is being requested.

The payoff statement shall be provided to the requesting party within 5 business days of receipt of the request and shall be in written form transmitted to the requesting party by such means as shall ensure receipt by the requesting party within such time period, including facsimile or other electronic transmission, if the request contained the telephone numbers, mailing addresses, electronic mail addresses or other information necessary to enable the provider of the payoff statement to respond within such time period. If only a mailing address is provided, the transmittal of the payoff statement need only be mailed and postmarked within such time period, unless overnight delivery is requested of or chosen by the provider of the payoff statement, in which case the provider of the payoff statement shall deliver the payoff statement to an overnight delivery service within such time period. Unless prohibited by law or the respective loan documents, the payoff statement provider may charge a reasonable fee for the cost of delivery of the payoff statement and the fee may be added to the payoff amount.

The payoff statement shall specify an amount certain, as of the payment date specified in the payoff request, that will pay off any and all indebtedness secured by the loan, if the requesting party so indicates.

(d) A lender, loan servicer or promissory note holder who fails without reasonable cause to provide a timely payoff statement as required by this section shall be liable to the borrower for the greater of $500 or the borrower’s actual damages caused by the failure, plus reasonable attorney’s fees and costs.

(e) A third party loan servicer shall, evaluate borrowers for all available loss mitigation options prior to default, communicate such options to the borrower, and attempt a resolution or workout of the delinquency, including a loan modification.

(f) A third party loan servicer shall provide to a borrower written acknowledgment of documentation submitted by the borrower in connection with a loan modification application within three (3) business days of receipt thereof. In the written acknowledgment, the third party loan servicer shall also include a list of any additional documents required and shall identify deadlines for submission of such documents.

(g) A third party loan servicer shall not refer or initiate default proceedings while a good faith loan modification program or proprietary trial modification evaluation is in process or the borrower’s application for any loss mitigation program is pending. A third party loan servicer shall not initiate default proceedings until the borrower has received written denial of all applicable loss mitigation programs and all applicable appeal periods have expired.

(h) A third party loan servicer shall provide borrowers with contact information for a designated employee(s) with primary responsibility to handle all loss mitigation communications with such borrower. The contact information shall include at least 1 toll free telephone number for direct communication with a loss mitigation staff person, at least 1 fax number for receipt of documents, and an e-mail address.

(i) Nothing in this section shall be construed to prevent a third party loan servicer from offering or accepting alternative loss mitigation options, including other modification programs offered by the third party loan servicer, or forbearance, if the borrower requests such an alternative, is not eligible for or does not qualify for a loan modification under loan modification program or proprietary modification program, or rejects the third party loan servicer’s loss mitigation proposal.

(j) A third party loan servicer shall ensure that all default affidavits or sworn statements are based on personal knowledge.

(k) A third party loan servicer shall ensure that default affidavits or sworn statements shall set forth a detailed description of the basis of affiant’s claimed personal knowledge of information contained in the affidavit or sworn statement, including sources of all information recited and a statement as to why the sources are accurate and reliable.

(l) The third party loan servicer shall provide such certification to the borrower with the notice of default, and shall include a copy of the promissory note with all required endorsements.

(m) An agreement of the parties in a payment installment contract defining default is enforceable only to the extent that the default is material and consists of the borrower’s failure to make one or more installments as required by the agreement;

(n) A borrower of student loans shall have a 150-day right to cure a default of a required payment by full payment of all amounts that are due without acceleration of the maturity of the unpaid balance of the student loan; provided, however, that if a creditor certifies that: (i) it has engaged in a good faith effort to negotiate a commercially reasonable alternative to default as described in subsection (c); (ii) its good faith effort has involved at least 1 meeting, either in person or by telephone, between a creditor’s representative and the borrower, the borrower’s attorney or the borrower’s representative; and (iii) after such meeting the borrower and the creditor were not successful in resolving their dispute, then the creditor may begin default proceedings after a right to cure period lasting 90 days. A borrower who fails to respond within 30 days to any mailed communications offering to negotiate a commercially reasonable alternative to default sent via certified and first class mail or similar service by a private carrier from the lender shall be deemed to have forfeited the right to a 150-day right to cure period and shall be subject to a right to cure period lasting 90 days. The right to cure a default of a required payment shall be granted at least once during any 3 year period, regardless of student loan holder.

(o) For purposes of this section, a determination that a creditor has made a good faith effort to negotiate and agree upon a commercially reasonable alternative to default shall mean that the creditor has considered: (i) an assessment of the borrower’s current circumstances including, without limitation, the borrower’s current income, debts and obligations; (ii) the interests of the creditor; provided, however, that nothing in this subsection shall be construed as prohibiting a creditor from considering other factors; provided, further, that the creditor shall provide by first class and certified mail or similar service by a private carrier to a borrower documentation of good faith effort 10 days prior to meeting, telephone conversation or a meeting pursuant to subsection (b).

(p) A borrower who receives a loan modification offer from the creditor resulting from the lender’s good faith effort to negotiate and agree upon a commercially reasonable alternative to default shall respond within 30 days of receipt of first class or certified mail. A borrower shall be presumed to have responded if the borrower provides: (i) confirmation of a facsimile transmission to the creditor; (ii) proof of delivery through the United States Postal Service or similar carrier; or (iii) record of telephone call to the creditor captured on a telephone bill or pin register. A borrower who fails to respond to the creditor’s offer within 30 days of receipt of a loan modification offer shall be deemed to have forfeited the 150-day right to cure period and shall be subject to a right to cure period lasting 90 days.

(q) Nothing in this section shall prevent a creditor from offering or accepting alternatives to default, such as a loan modification or consolidation, if the borrower requests such alternatives, rejects a loan modification offered pursuant to this subsection or does not qualify for a loan modification pursuant to this subsection.

(r) A creditor that chooses to begin default proceedings after a right to cure period lasting less than 150 days that engaged in a good faith effort to negotiate and agree upon a commercially reasonable alternative but was not successful in resolving the dispute shall certify compliance with this section in an affidavit. The affidavit shall include the time and place of the meeting, parties participating, relief offered to the borrower, a summary of the creditor’s net present value analysis and applicable inputs of the analysis and certification that any modification or option offered complies with current federal law or policy. A creditor shall provide a copy of the affidavit to the borrower.

(s) The lender, or anyone holding thereunder, shall not accelerate maturity of the unpaid balance of such student loan obligation or otherwise enforce the loan because of a default consisting of the borrower’s failure to make any such payment in subsection (b) by any method authorized by this chapter or any other law until at least 150 days after the date a written notice is given by the lender to the borrower; provided, however, that a creditor meeting the requirements of subsection (b) that chooses to begin default proceedings after a right to cure period lasting less than 150 days may accelerate maturity of the unpaid balance of such student loan obligation or otherwise enforce the student loan because of a default consisting of the borrower’s failure to make any such payment in subsection (b) by any method authorized by this chapter or any other law not less than 91 days after the date a written notice is given by the creditor to the borrower.

Said notice shall be deemed to be delivered to the borrower: (i) when delivered by hand to the borrower; or (ii) when sent by first class mail and certified mail or similar service by a private carrier to the borrower at the borrower’s address last known to the lender and anyone holding thereunder.

(t) The notice required in subsection (g) shall inform the borrower of the following:—

After a default by a borrower under a payment agreement, the secured creditor may not bring an action against the borrower until creditor gives the borrower the notice described in this section. The notice so required shall be deemed to be delivered when delivered to the debtor or when mailed to the debtor at the debtor’s address last known to the creditor. If a borrower cures a default after receiving notice and again defaults, the creditor shall give another notice before bringing an action with respect to the subsequent default, but no notice is required in connection with a subsequent default if, within the period commencing on the date of the payment agreement subject to this section and the date of the subsequent default, the debtor has cured a default after notice three or more times.

(u) The notice shall be in writing and shall be given to the borrower ten days or more after the default. The notice shall conspicuously state the rights of the borrower upon default in substantially the following form:—

The body of the notice shall read:—“You may cure your default in (describe transaction in a manner enabling borrower to identify it) by paying to (name and address of creditor) (amount due) before (date which is at twenty-one days after notice is mailed). If you pay this amount within the time allowed, you are no longer in default and may continue with the transaction as though no default had occurred.

If you do not cure your default by the date stated above, the said creditor may sue you to obtain a judgment for the amount of the debt.”

The nature of the default claimed on such student loan and of the borrower’s right to cure the default by paying the sum of money required to cure the default;

The date by which the borrower shall cure the default to avoid acceleration, which date shall not be less than 150 days after service of the notice and the name, address and local or toll free telephone number of a person to whom the payment or tender shall be made unless a creditor chooses to begin default proceedings after a right to cure period lasting less than 150 days that engaged in a good faith effort to negotiate and agree upon a commercially reasonable alternative but was not successful in resolving the dispute, in which case a default may take place on an earlier date to be specified;

The name and address of the lender, or anyone holding thereunder, and the telephone number of a representative of the lender whom the borrower may contact if the borrower disagrees with the lender’s assertion that a default has occurred or the correctness of the lender’s calculation of the amount required to cure the default;

The name of any current and former servicer or loan originator for such student loan or promissory note; and

The borrower may have the following additional rights, depending on the terms of the student loan: (i) to refinance the obligation by obtaining a loan which would fully repay the lender;

The notice shall also include a declaration, in the language the creditor has regularly used in its communication with the borrower, appearing on the first page of the notice stating: “This is an important notice concerning your private student loan. Have it translated at once.”

(v) During the 21 day period after delivery of the notice required by this section the creditor may not because of that default accelerate the unpaid balance of the obligation, bring action against the borrower, or co-signer.

(w) Unless the secured creditor has first notified the buyer that the creditor has elected to accelerate the unpaid balance of the obligation because of default, or brought action against the borrower, the borrower may cure a default consisting of a failure to pay money by tendering the amount of all unpaid sums due at the time of tender, without acceleration, plus any unpaid delinquency or deferral charges. Such a cure shall restore the buyer to his rights under the agreement as though the defaults had not occurred subject to the provisions of subsection (b).

(x) The lender, or anyone holding thereunder, shall not accelerate maturity of the unpaid balance of such student loan obligation or otherwise enforce the loan because of a default consisting of the borrower’s failure to make any such payment in subsection (a) if the ability to repay is changed by either the death or permanent disability of either the borrower or co-signer. Should the borrower or co-signer die or become permanently disabled the obligation to repay shall remain with the surviving party as per established payment arrangements, notwithstanding the ability to satisfy the debt by early payoff.

SECTION 9. Said chapter 167E is hereby further amended by inserting the following section:-

Section 24. The division of banks shall adopt regulations in accordance with this subsection.

(a) To cure a default prior to acceleration under this section, a borrower shall not be required to pay any charge, fee or penalty attributable to the exercise of the right to cure a default. The borrower shall pay late fees as allowed pursuant to section 59 of chapter 183 and per-diem interest to cure such default. The lender shall not be liable for any attorneys’ fees relating to the borrower’s default that are incurred by the lender or anyone holding thereunder prior to or during the period set forth in the notice required by this section.

(b) Each lender who makes a private student loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

(c) Each servicer of any private student loan shall notify the borrower in writing of any assignment, sale, or transfer of the servicing of the loan to any other person.

(d) Except as provided under subparagraph (e), the notice required under subsection (c) shall be made to the borrower not less than 15 days before the effective date of transfer of the servicing of the student loan (with respect to which such notice is made).

(e)The notice required under paragraph (1) shall be made to the borrower not more than 30 days after the effective date of assignment, sale, or transfer of the servicing of the student loan (with respect to which such notice is made) in any case in which the assignment, sale, or transfer of the servicing of the student loan is preceded by:

(i) termination of the contract for servicing the loan for cause;

(ii) commencement of proceedings for bankruptcy of the servicer; or

(iii) commencement of proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership of the servicer (or an entity by which the servicer is owned or controlled).

(2) The notice required under subsection (c) shall include the following information:

(A) The effective date of transfer of the servicing described in such paragraph.

(B) The name, address, and toll-free or collect call telephone number of the transferee servicer.

(C) A toll-free or collect call telephone number for

(i) an individual employed by the transferor servicer, or

(ii) the department of the transferor servicer, that can be contacted by the borrower to answer inquiries relating to the transfer of servicing.

(D)The name and toll-free or collect call telephone number for

(i) an individual employed by the transferee servicer, or

(ii) the department of the transferee servicer, that can be contacted by the borrower to answer inquiries relating to the transfer of servicing.

(E) The date on which the transferor servicer who is servicing the student loan before the assignment, sale, or transfer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments.

(F) Any information concerning the effect the transfer may have, if any, on the terms of or the continued availability of discharge terms.

(G) A statement that the assignment, sale, or transfer of the servicing of the student loan does not affect any term or condition of the security instruments other than terms directly related to the servicing of such loan.

(e) Notice by transferee of loan servicing at time of transfer

(1) Each transferee servicer to whom the servicing of any student loan is assigned, sold, or transferred shall notify the borrower of any such assignment, sale, or transfer.

(2) (A) Except as provided in subparagraphs (B) and (C), the notice required under paragraph (1) shall be made to the borrower not more than 15 days after the effective date of transfer of the servicing of the student loan (with respect to which such notice is made).

(B) The notice required under paragraph (1) shall be made to the borrower not more than 30 days after the effective date of assignment, sale, or transfer of the servicing of the student loan (with respect to which such notice is made) in any case in which the assignment, sale, or transfer of the servicing of the student loan is preceded by—

(i) termination of the contract for servicing the loan for cause;

(ii) commencement of proceedings for bankruptcy of the servicer; or

(iii) commencement of proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership of the servicer (or an entity by which the servicer is owned or controlled).

(C) If any servicer of a student loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 20 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.

(D) For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that—

(i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and

(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

(E) Not later than 60 days (excluding legal public holidays, Saturdays, and Sundays) after the receipt from any borrower of any qualified written request under subsection (c) and, if applicable, before taking any action with respect to an inquiry of the borrower, the servicer shall—

(F) make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of such correction (which shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower);

(G) after conducting an investigation, provide the borrower with a written explanation or clarification that includes—

(i) to the extent applicable, a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer; and

(ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower; or

(H) after conducting an investigation, provide the borrower with a written explanation or clarification that includes—

(i) information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer; and

(ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower.

(I) During the 60-day period beginning on the date of the servicer’s receipt from any borrower of a qualified written request relating to a dispute regarding the borrower’s payments, a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency.

SECTION 10. Chapter 183 of the General Laws is hereby amended by striking out section 59 and inserting place thereof the following section:-

Section 59. A servicer or creditor shall not require the borrower to pay a late charge or late payment penalty unless the penalty is specifically authorized in the promissory note.

A servicer or creditor, shall not require the borrower to pay a penalty or late charge for any payment paid within 15 days from the date the payment is due.

In no event, in assessing a penalty because of the delinquency in making all or any part of a periodic payment under a promissory note, shall the penalty or late charge exceed 3 per cent of the amount of principal and interest overdue.

A late payment penalty or late charge may not be charged more than once with respect to a single late payment. If a late payment fee is deducted from a payment made on the loan, and the deduction causes a subsequent default on a subsequent payment, no late payment fee may be imposed for the default. If a late payment fee has been once imposed with respect to a particular late payment, a fee shall not be imposed with respect to any future payment which would have been timely and sufficient, but for the previous default.

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